Dueling lawsuits are suspended as focus turns to selling units in slumping market

March 04, 2009|By Mary Ellen Podmolik, TRIBUNE REPORTER

Donald Trump and the lead lender on his Trump International Hotel and Tower have reached a temporary truce over the project's finances, as they try to curb concerns among potential buyers of the skyscraper's condominiums.

Trump and Deutsche Bank Trust Cos. Americas announced Tuesday they have suspended lawsuits against each other and will try to settle their differences rather than wage public court battles that could give buyers even more reason to stay on the sidelines during a morose real estate market.

While the project has seen a recent uptick in sales, both sides agreed that sidelining the lawsuits would assist in marketing the 92-story tower at 401 N. Wabash Ave. The skyscraper is likely to be the last new high-rise in Chicago for some time, and Trump has lamented that restrictions by a lending consortium led by Deutsche have thwarted his efforts to sell units.

Trump and Deutsche filed suits against each other in November. Trump first sued Deutsche and other lenders in New York State Supreme Court in Queens, seeking to excuse a repayment of more than $330 million due Nov. 7 and extend the $640 million construction loan for an unspecified amount of time. In the suit, Trump claimed that the global economic crisis was a "once-in-a-lifetime credit tsunami" affecting his ability to sell units at the Tower and repay the loan. He also sought $3 billion in damages.

Deutsche then filed its lawsuit in New York State Supreme Court in Manhattan, claiming Trump personally owed the bank $40 million after defaulting on the loan.

Several issues need to be resolved. Among them is Trump's assertion that the minimum selling prices of the units, set in 2005 during the market's zenith, are no longer realistic and Deutsche needs to agree to lower them. Some of the building's earliest buyers are marketing units for resale at prices substantially below the prices at which Trump can sell units.

Also to be negotiated is a maturity date on the $640 million construction loan and a price by which Trump could fulfill his desire to buy unsold hotel condo units in that portion of the project. In November, Trump offered $96.6 million for those units but he acknowledged Tuesday the market has changed dramatically since his initial offer last fall.

Some parts of the dispute may be moot. Deutsche has continued to cover the building's construction costs, and there is less than $50 million left to fund on the loan; construction is expected to be completed in late May or early June. The suits will be shelved for an undisclosed period of several months, a "very nice chunk of time," said Trump attorney Jason Greenblatt. That means construction of the tower could be finished, and theoretically some of the issues resolved, long before the parties ever get back to court.

"I think it's going to sell nicely," said Trump, noting that construction has stopped on the city's two other high-profile skyscrapers, Waterview Tower and Shangri-La Hotel and Chicago Spire. "We're doing better than anybody else in Chicago."

About 75 percent of Trump's residential condos and 67 percent of its hotel condo units have been sold, according to Appraisal Research Counselors. Contracts recently were signed on three units that ranged in price from $2.4 million to more than $3 million, Greenblatt said.

"If the closing pace continues, we'll be in good shape," he added.

The effort to end the public legal wrangling comes as one report after another shows a deepening slide in the housing market. On Tuesday, the National Association of Realtors said pending home sales in January -- contracts signed on previously owned homes but not yet closed -- were at their lowest level since the group began tracking them in 2001.